Portfolio | Why air miles and other indicators offer clues to China’s new economy
The growth in consumption as a component of the economy highlights the need for a new approach that better tracks the consumer
Cash withdrawals by ATM banking cards and the number of air miles clocked by the millions of passengers taking to the skies annually might be a better indicator of the health of the new economy in China than traditional measurements used by economists, analysts said.
By looking to new spending and consumption patterns, the idea is to better gauge the drivers of an economy as it transitions away from the traditional investment-led growth model.
A report issued by Jefferies China research last week highlighted the necessity of using a new methodology when analysing China.
“The problem is that much of the data the market fixates on — electricity production, freight rail, bank loans, manufacturing PMI — are proxies for investment/manufacturing, the old growth model. The market has not focused on proxies for consumption/services, the new growth model,” the report said.
Even consumption itself is undergoing changes. For example, retail sales figures provide a gauge of consumer spending, but they don’t track the rise of services as a component of the overall economy.
This argument is echoed by Nicholas Lardy, an expert on Chinese statistics at the Peterson Institute for International Economics. He notes that services account for as much as two-fifths of China’s consumer spending.
To help sort out this blind spot, Jefferies analysts came up with a suggestion. They propose nine new indicators as a way of filling the gap in traditional data.
